The federal tax credit is based on vehicle battery size. All vehicles offered in the 2018 Sales Event qualify for the full $7,500 credit except for the Audi A3 e-tron. Its credit is $4,085.

Any tax-paying entity can file for the credit.

The federal government allocated set amounts of tax credits to each auto manufacturer. Credits taper off as the manufacturer approaches its specified number of vehicles.

For vehicle buyers, the federal tax credit can be used only for the tax year in which the purchase is made. If the buyer's total tax liability is less than $7,500, the credit can only be used to offset that tax year's total liability.

Example 1: Jane Doe buys an EV that qualifies for a $7,500 credit. Her federal tax owed for the year of purchase (including employer withholdings and self-employment pre-payments) is $5,000. Jane will receive a $5,000 refund.

Example 2: Mary Buck buys an EV that qualifies for a $7,500 credit. Her federal tax owed for the year of purchase (including employer withholdings and self-employment pre-payments) is $20,000. Jane will receive a $7,500 refund.

The federal tax credit also applies to leased vehicles.

About Colorado's tax credit:

Colorado's "Innovative Motor Vehicle" income tax credit is a flat $5,000 for the purchase of any plug-in hybrid or all-electric vehicle, and $2,500 for the lease of any plug-in hybrid or all-electric vehicle.

Any tax-paying entity can file for the credit.

The credit is fully refundable. The vehicle buyer will get the full $5,000 credit even if their state income tax liability is less than that amount. The vehicle customer who leases a qualifying vehicle will get the full $2,500 credit even if their state income tax liability is less than that amount.

Colorado's tax credits will taper down in the coming years and end on Dec. 31, 2021:

Sales in 2018 and 2019: $5,000 for purchase / $2,500 for lease

2020: $4,000 purchase / $2,000 lease

2021: $2,500 purchase / $1,500 lease

About Colorado's assignable tax credit refund:

In 2016, legislators passed HB 1332, which allows vehicle buyers to assign the "Innovative Motor Vehicle" income tax credit to a financing entity at the time a new electric vehicle is leased, or purchased using financing.

Ask your dealer if its financing entity has signed up with the Colorado Department of Revenue. If it has, and if you chose to lease the vehicle or purchase with dealer financing, the dealer can offer the tax credit at the time of sale. Buyers don't have to wait to file their taxes the following year to benefit from the state tax credit.

Banks or credit unions providing auto loans can also offer the assigned tax credit, if they have signed up with the Colorado Department of Revenue.

The dealership's financing entity, bank or credit union will ask the buyer or lessee to sign a Colorado Department of Revenue “Election Statement” form, DR 618, to document the transaction at the time of purchase.

The financing entity may collect a fee of up to $150 from the buyer's tax credit to cover its administrative costs for processing the assignment.